UPDATE 3-CenturyTel, Qwest results impress ahead of merger

* CenturyTel rev $1.8 bln vs Wall St view $1.79 bln

* CenturyTel Q1 share $0.93 vs Wall St view $0.86

* Qwest Q1 share $0.02 vs year ago $0.12

* Qwest Q1 rev down 6.5 pct to $2.97 bln vs est. $2.94 bln

* Qwest shares up 2.48 pct, CenturyTel shares up 1.29 pct

(Adds analyst comment, guidance, share price updates)

By Sinead Carew and Franklin Paul

NEW YORK, May 5 (Reuters) - CenturyTel Inc's CTL.N first-quarter results topped Wall Street expectations, giving investors high-hopes for the success of its planned acquisition of Qwest Communications International Inc Q.N.

The shares of both companies rose after CenturyTel also raised its financial guidance and Qwest beat earnings expectations, excluding a first-quarter tax-related charge.

The telephone companies have been banking on cost cuts or acquisitions for profit growth as they face competition from cable and Internet phone providers in a market where consumers are cutting the cord to rely entirely on their cellphone.

CenturyTel, which does business as CenturyLink, plans to buy Qwest for $10.6 billion in stock early next year, combining the third- and fourth-biggest U.S. phone operators. Its results were boosted by its July purchase of another operator, Embarq.

“It’s a good sign that the Embarq integration is going well for CenturyTel, which should give investors confidence of their ability to integrate Qwest,” said Hudson Square Research analyst Todd Rethemeier, who was impressed by operating and financial results at both companies.

He said Qwest access line losses of 262,000 was better than the 327,000 losses in the year-ago quarter and his estimate for losses of 329,000, and CenturyTel’s line losses of 126,000 narrowed from 140,000 in the year-ago quarter.

CenturyTel’s addition of 70,000 broadband subscribers were well ahead of Rethemeier’s 45,000 estimate, while Qwest’s addition of 40,000 broadband customers compared well with his expectation for 25,000.

CenturyTel’s profit excluding unusual items rose to $279.22 million, or 93 cents per share, from $81.9 million, or 82 cents per share, in the same quarter last year and were ahead of analyst expectations for earnings per share of 86 cents per share, according to Thomson Reuters I/B/E/S.

Boosted by the Embarq deal, CenturyTel revenue rose to $1.8 billion from $635.4 million the year before and was ahead of analyst expectations for revenue of $1.79 billion.

CenturyTel also said its 2010 earnings and revenue could be higher than previously expected.

It forecast an operating revenue decline of 6.5 percent to 7.5 percent compared with its previous expectation for a decline of 7.5 percent to 8.5 percent.

It boosted its earnings per share outlook for the year to between $3.20 and $3.30 compared with its previous outlook of $3.10 to $3.20.

Qwest’s profit fell to $38 million, or 2 cents per share, from $206 million, or 12 cents per share, in the same quarter the year before.

Excluding a big tax related charge, Rethemeier said earnings would have been 10 cents per share compared with his expectation of 8 cents per share.

Qwest’s revenue fell to $2.97 billion from $3.17 billion a year earlier. Wall Street analysts on average expected revenue of $2.94 billion, according to Thomson Reuters I/B/E/S.

Qwest’s Chief Operating Officer, Teresa Taylor, said in an interview the company’s home phone business appeared to be stabilizing and that, for the first time since 2007, Qwest’s small business revenue did not decline.

Taylor said the strength of orders from big business clients suggest Qwest will see growth in that segment later this year.

“In the business markets group, we’re expecting stronger revenue in the second half of 2010,” Taylor said, adding that, on the consumer side, “the line losses ... seems to have flattened.”

Qwest shares were up 14 cents, or 2.7 percent, at $5.39 on New York Stock Exchange, where CenturyTel shares were up 1.3 percent, or 45 cents, at $34.52. (Reporting by Franklin Paul and Sinead Carew, editing by Gerald E. McCormick and Derek Caney)